A series LLC, or series limited liability company, is a type of limited liability company that provides liability protection across multiple "series" or subsidiaries, each of which is theoretically protected from liabilities arising from the other series. It consists of a "parent" or "umbrella" LLC with one or more sub-LLCs or "series" that branch off from it. Each child series or sub-LLC should have its own bank account, name, and records, and if there is a lawsuit incurred by one series, the other series are protected from liability. The concept of a series LLC was first introduced to help the mutual fund industry avoid filing multiple SEC filings for different classes of funds.
The utility of a series LLC may be explained by a comparison to the alternative. Many form an LLC in order to protect personal assets from a legal claim relating to their real estate investment or business liabilities. Additional liability protection may be gained by properly forming and maintaining a separate LLC to hold each property or business entity. However, a series LLC may be able to pay a single set of annual state fees and may be able to file one income tax return each year, which streamlines administrative tasks.
Series LLCs can be useful for LLCs that operate multiple lines of business or investments and want to insulate each line from risks incurred by the others. Common examples include real estate investors with several rental properties and investment firms with multiple investment strategies. However, the series LLC is a complex entity that can be hard to understand, and it comes with a number of risks and unanswered questions that have so far limited its use, to some extent, to sophisticated enterprises like investment companies and special purpose entities.
